On Friday, Investor’s Business Daily posted an editorial about inflation. The editorial shows the contrast between inflation in areas of our economy heavily regulated by the government and inflation in areas less regulated.
Here is the chart:
The chart was put together by economist Mark Perry, who tracked the changes in prices over the past 20 years for various goods and services. (Perry’s blog, Carpe Diem, is a must read for anyone looking for clarity on economic matters.)
Note the impact free market capitalism has on inflation–it keeps it under control.
The article concludes:
The ones below the inflation line — many of which actually saw prices decline over the past two decades — are all in highly competitive industries: autos, cellphones, clothing, software, TVs, toys. Two that track inflation, not surprisingly since they account for much of the nation’s spending, are food and housing.
But look at the areas where inflation has been surging: they fall into two broad categories: health care and college education. What do these have in common? Both are subject to massive amounts of government subsidies.
In the case of health care, the federal government now accounts for more than 40% of all health spending. It subsidizes care for the elderly, the poor, and now thanks to ObamaCare, the middle class. Given that health care spending makes up almost one-fifth of GDP, this is a big deal.
As to colleges, federal aid has exploded over the past 20 years, climbing 51% since 1997 — after adjusting for inflation — according to the College Board, which tracks these numbers. Last year, loan subsidies, grants and special tax brakes added up to $113.8 billion.
All that subsidy money was premised on the goal of making these things more affordable. The result is, for many, the exact opposite. By paying most of the tab, the government has insulated consumers from the true cost of these things — a recipe for runaway prices.
Yet instead of dealing with the cause, policymakers keep talking about either adding still more subsidy fuel to the fire, or imposing price controls.
If policymakers want to tackle inflation, the first step would be to review those federal policies that are driving it.
Removing the overabundance of government regulations on businesses is good for everyone. We need to elect leaders who will do that.